The Kurdistan Region of the Republic of Iraq (KRI) is a constitutionally recognized semiautonomous region in northern Iraq with a population of 5.1 million (2012 estimate).
... See More + Its government (the KRG), based in Erbil, has the right, under the Iraqi constitution of 2005, to exercise legislative, executive, and judicial powers according to the constitution, except in what is listed therein as exclusive powers of the federal authorities. This ESIA report is organized in three chapters: (1) the macro fiscal impact of the crises, (2) the social development impact of the crises, and (3) the infrastructure impact of the crises. Under the macro fiscal impact of the crises, macroeconomic and fiscal implications are analyzed with a focus impact on trade in goods and services, the private sector, and financial services. The social development impact of the crises identified impact and stabilization costs in the health and education sectors, as well as for food security and agricultural livelihood, poverty and welfare, social assistance and labor, housing and shelter, and social cohesion and citizen security. The final chapter on the impact of the conflicts on infrastructure focuses on water and sanitation, solid waste management, and the energy and transportation sectors.
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The authors use data from more than 6,000 World Bank projects evaluated between 1983 and 2009 to investigate macro and micro correlates of project outcomes.
... See More + They find that country-level "macro" measures of the quality of policies and institutions are very strongly correlated with project outcomes, confirming the importance of country-level performance for the effective use of aid resources. However, a striking feature of the data is that the success of individual development projects varies much more within countries than it does between countries. The authors assemble a large set of project-level "micro" correlates of project outcomes in an effort to explain some of this within-country variation. They find that measures of project size, the extent of project supervision, and evaluation lags are all significantly correlated with project outcomes, as are early-warning indicators that flag problematic projects during the implementation stage. They also find that measures of World Bank project task manager quality matter significantly for the ultimate outcome of projects. They discuss the implications of these findings for donor policies aimed at aid effectiveness.
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Prevailing economic ideas -- and fashions -- about development have influenced the International Development Association (IDA) since its creation in 1960.
... See More + The creation of the organization itself is the result of two contemporaneous facts: an urgent need to channel development finance to least-developed countries and an increasing pressure on World Bank management to directly address the issue of poverty in developing countries. Changing views, over time, have been a rationale -- and, at times, a justification -- for emphasizing poverty and social sectors; for providing grants to particular groups of countries; and for strategic choices and sectoral priorities. IDA has been influential in development debates and been an advocate for specific views about development policy. This paper gives an overview of these views and documents how they have shaped the activities of the organization since its creation. After a brief review of development thinking and of the organization of research at the World Bank, the paper documents the shifts that have taken place in country allocations and in sector emphasis in IDA over the past 50 years and highlights the strategic themes that have guided its development agenda: toward increasing country selectivity; from projects to programs; from conditionality to country ownership of reforms; and from input-based to results-based performance.
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This article takes an integrated approach to evaluating the interaction of initial conditions, political change, reforms and economic performance in a unified framework covering 28 transition economies in East Asia, Central and Eastern Europe, and the Former Soviet Union (FSU).
... See More + Initial conditions and economic policy jointly determine the large differences in economic performance among transition economies. Initial conditions dominate in explaining inflation, but economic liberalization is the most important factor determining differences in growth. Political reform emerges as the most important determinant of the speed and comprehensiveness of economic liberalization, raising the important question of what determines political liberalization. Results suggest the importance of the level of development in determining the decision to expand political freedoms.
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Circumstance and choice: the role of initial conditions and policies in transition economies; by Martha de Melo, Cevdet Denizer, Allan Gelb and Stoyan Tenev.
... See More + Multi-tier targeting of social assistance: the role of intergovernmental transfers; by Harold Alderman. Flight capital as a portfolio choice; by Paul Collier, Anke Hoeffler and Catherine Pattillo. The impact of early childhood nutritional status on cognitive development: does the timing of malnutrition matter? By Paul Glewwe and Elizabeth M. King. The mystery of the vanishing benefits: an introduction to impact evaluation; by Martin Ravallion. Does ignoring heterogeneity in impacts distort project appraisals? An experiment for irrigation in Vietnam; by Dominique van de Walle and Dileni Gunewardena. New tools in comparative political economy: the database of political institutions; by Thorsten Beck, George Clarke, Alberto Groff, Philip Keefer and Patrick Walsh.
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Countries with more developed financial sectors, experience fewer fluctuations in real per capita output, consumption, and investment growth. But the manner in which the financial sector develops matters.
... See More + The relative importance of banks in the financial system is important in explaining consumption, and investment volatility. The proportion of credit provided to the private sector, best explains volatility of consumption, and output. The authors generate their main results using fixed-effects estimates with panel data from seventy countries for the years 1956-98. Their general findings suggest that the risk management, and information processing provided by banks, maybe especially important in reducing consumption, and investment volatility. The simple availability of credit to the private sector, probably helps smooth consumption, and GDP.
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The authors examine banking efficiency before and after liberalization, drawing on Turkey's experience. They also investigate the scale effect on efficiency by type of ownership.
... See More + Their findings suggest that liberalization programs were followed by an observable decline in efficiency, not an improvement. During the study period Turkish banks did not operate at the optimum scale. Another unexpected result was that efficiency was no different between state-owned and privately owned banks. Banks that were privately owned or foreign owned had been expected to respond better to liberalization, because they were smaller and more dynamically structured, but they were no more efficient than state-owned banks. One reason for the systemwide decline in efficiency might have been the general increase in macroeconomic instability during the period studied.
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Despite high and volatile inflation, a record number of foreign and local banks entered Turkey's banking sector after the country relaxed rules about bank entry, and generally eliminated controls on interest rates, and financial intermediation in 1980.
... See More + The country's financial integration with the rest of the world took a big step forward with the opening up of the capital account in 1989. Capital inflows rose significantly, and the financial system became increasingly linked with external markets. The author examines one dimension of liberalization: the impact of foreign banks entering the financial sector. Between 1980 and the end of 1997, 17 foreign banks, and a number of new local banks entered the sector. The author investigates how these banks' entry into the sector affected performance, based on three measures: net interest margin, overhead expenses, and return on assets (all expressed as a percentage of total assets). He finds that: 1) Foreign bank ownership is related to all three performance measures. 2) Foreign bank entry reduced the overhead expenses of domestic commercial banks, strengthening profits. 3) Despite their small scale operations, foreign banks entering the sector had a strong effect on competition. But the market could use more competition. 4) There are strong indications that foreign banks had a positive impact on financial, and operational planning, credit analysis and marketing, and human capital.
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Saving in developing countries: an overview by Norman Loayza, Klaus Schmidt-Hebbel, and Luis Serven. Can Africa's saving collapse be reversed? by Ibrahim A.
... See More + Elbadawi and Francis M. Mwega. The saving collapse during the transition in Eastern Europe by Cevdet Denizer and Holger C. Wolf. What drives consumption booms? by Peter J. Montiel. Saving transitions by Dani Rodrik. Personal and corporate saving in South Africa by Janine Aron and John Muellbauer. Household saving in China by Aart Kraay. Private saving in India by Norman Loayza and Rashmi Shankar. A new development database on the structure and development of the financial sector by Thorsten Beck, Asl' Demirguc-Kunt, and Ross Levine.
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Almost all of the transition economies in Eastern Europe and the former Soviet Union experienced a severe decline in their national saving rates.
... See More + The saving collapse could be explained by the elimination of involuntary saving, a feature of central planning, or by a change in equilibrium saving reflecting the new economic-circumstances following the end of socialism. The predicted saving rates of market economies with the same fundamentals as the transition economies before the transition are computed to test for the presence of involuntary saving. The results provide some support for the hypothesis of consumption smoothing. Also considered is whether differences m the extent of liberalization affected saving rates in the cross section of transition economies. This is found to be the case: greater liberalization is association with lower saving with a one-year lag. To the extent that liberalization is associated with future growth, this finding is consistent with smoothing m the face of output evolving along J-curve.
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Recent developments in a number of emerging economies have heightened interest in the relationship between macroeconomic management and financial regulation, in an environment of open capital accounts and large-scale movements of private capital.
... See More + The authors analyze the Turkish experience with capital flows in a macro-economy characterized by chronically high inflation and fiscal deficits. They study the relationship between capital flows, macroeconomic management, and vulnerability in the financial system. Their analysis highlights the importance of fiscal policy in an era of large capital flows. Fiscal imbalances contributed both to real exchange rate appreciation and high real interest rates in Turkey. The high interest rates the government must pay on domestic debt have become one of the key issues of Turkey's macroeconomic management. Only by reducing its interest expenses can fiscal deficits be reduced and greater stability be achieved. The Turkish banking system, in becoming increasingly integrated with international financial markets, has become vulnerable to shifts in market confidence. Banks borrowed abroad in response to macroeconomic imbalances to benefit from high interest rates on domestic loans and government paper. In the process, the banks have exposed themselves to interest rate risk, to foreign-exchange risk, and to large credit risks. To reduce the Turkish economy's vulnerability to external shocks, financial regulation must be strengthened simultaneously with the achievement of macroeconomic stability.
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Financial systems in developing countries tend to be "restricted" or "repressed" through burdensome reserve requirements, interest-rate ceilings, foreign-exchange regulations, rules about the composition of bank balance sheets, or heavy taxation of the financial sector.
... See More + Why are governments drawn to regulate financial markets to the point of financial repression? To address this question, the authors explore preliminary evidence from the post-Communist economies of Eastern Europe and the former Soviet Union, where financial regulations have rarely been examined systematically. They find that public-finance framework has limited ability to explain financial repression in the transition economies, given the peculiar financial lineage of the socialist state. The weak distinction between "public" and "private" spheres of finance in transition economies means that the deficit often conveys little information about the governments' real fiscal activities. It is more fruitful to examine how political institutions, by shaping the incentives politicians face, affect financial policy. Their findings suggest that post-Communist governments may adopt repressive financial controls - not to finance deficits more cheaply than would be the case under financial liberalization, but to maintain the authority and ensure the survival of those in power. In countries where pre-reform elites are plentiful in legislative bodies, where interparty competition is low, and where government parties are well-represented in parliaments, elites have been able to perpetuate a system of implicit subsidies by "softening up" the financial sector - especially commercial banks - to ensure the continued flow of cheap credit to specific borrowers. The main beneficiaries of these policies - large formerly state-owned industries with tight financial links to the largest commercial banks - are thus able to convert their well-established claims on public resources into preferential access to credit lines. In other words, financial repression in transition economies may simply serve to solidify main-bank, main-firm relations. These results would lend support to the claim of smaller, cash-starved Eastern European entrepreneurs that the commercial banks have "taken over the role of the old planning ministries."
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A course on macroeconomic management was held in Ankara, Turkey, from July 7-17, 1998, by the Economic Development Institute (EDI). The background work that led to the development of this course showed that stability enhancing policies and policies that help to secure investment can lead to a reduction in the incidence of poverty.
... See More + Therefore, this course aimed to promote those kinds of macroeconomic policies through two primary course objectives. First, it aimed to improve participant ability to investigate, debate, and formulate policies related to macroeconomic issues. The second goal was to facilitate the transfer of macroeconomic knowledge to a wider audience through participant-trainers and participating training institutions. To accomplish these goals, the course reviewed current analytical and methodological advances in the field of development macroeconomics in Turkey, the Middle East, and transition economies. The targeted audience was the World Bank staff, policy advisors in government, university professors, and researchers.
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The experience of countries in transition from a planned to a market-oriented economy has varied greatly. The clearest differences are between the East Asian countries, China and Vietnam, and the countries of Central and Eastern Europe (CEE) and the former Soviet Union (FSU).
... See More + China and Vietnam have contained inflation and benefited from continued high growth in GDP since the beginning of their reforms, while all CEE and FSU countries have experienced large declines in output, and most have experienced hyperinflation. But even in CEE and the FSU, differences are marked. Some countries have lost over half of their GDP, and growth performance in a number of countries is still poor, while others are growing strongly. Some are still suffering from high inflation while others have successfully reduced annual inflation. What determines this divergence of outcomes across transition countries? No study so far has analyzed the interaction of all factors, including initial conditions, political change, and reforms, in a unified framework including CEE, the FSU, China, and Vietnam. The authors examine these broader interactions, but focus first on the role of initial conditions, such as initial macroeconomic distortions and differences in economic structure and institutions, which have been emphasized less in the literature. They find that initial conditions and economic policy jointly determine the large differences in economic performance among the 28 transition economies in the sample. Initial conditions dominate in explaining inflation, but economic liberalization is the most important factor determining differences in growth. But reform policy choices are not exogenous. They depend, in turn, on both initial conditions and political reform, with political reform the most important determinant of the speed and comprehensiveness of economic liberalization. Other findings provide additional insight into these relationships. Results show that liberalization has a negative contemporaneous impact, but a stronger positive effect on performance over time. The results also show that macroeconomic and structural distortions are negatively related to both policy and performance. Regarding the former, unfavorable initial conditions discourage policy reforms but do not diminish their effectiveness once they are implemented. The authors find some evidence that the influence of initial conditions diminishes over time. This is in part because many of the initial conditions are themselves modified in the course of transition. Monetary overhangs are dissipated through inflation, industrial overhang is eroded as plants shut down, and market memory returns through experience.
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Until 1980 Turkey's financial system was shaped to support state-oriented development. After the 1960s the financial system, dominated by commercial banks, became an instrument of planned industrialization.
... See More + Turkey had an uncompetitive financial market and an inefficient banking system. Controlled interest rates, directed credit, high reserve requirements and other restrictions on financial intermediation, and restricted entry of new banks -plus the exit of many banks between 1960 and 1980- created a concentrated market dominated by banks owned by industrial groups with oversized branch networks and high overhead costs. Turkey since 1980 has seen a trend toward liberalization of its financial market. Reforms eliminated interest rate controls, eased the entry of new financial institutions, and allowed new types of instruments. Regulatory barriers were relaxed, attracting many banks (both Turkish and foreign) into the system, and Turkey's banking system became integrated with world markets. The author examines how reform has changed the system, focusing on Turkey's commercial retail banking market. He finds that: (1) Although reform reduced concentration in the industry, leading banks are still able to coordinate their pricing decisions overtly. High profitability appears to have resulted from the banks uncompetitive pricing rather their efficiency. Deregulation and liberalization should be continued and strengthened. (2) The entry of small-scale firms alone is not enough to increase competition, so new banks should probably not be expected to alter the market structure. (3) To promote competition will require addressing barriers to both entry and mobility. The main barrier to mobility seems to be the size of the large banks, which exerts a significant negative effect on competition. (4) Interbank rivalry among the leading banks cannot be facilitated without creating new banks of a certain size with a reasonable number of branches. Breaking up public banks (which hold 30 percent of sectional assets, excluding the Agricultural Bank and three development banks) could help create 15 to 20 new banks with 40 to 50 branches. This would reduce concentration and improve mobility in retail banking. (5) Breaking up public banks before privatization would probably also improve their governance structures and efficiency. (6) Promoting the entry of nonbanks and local banks would also increase the number of institutions competing for deposits. Turkey lacks a healthy variety of credit institutions and should consider developing a mortgage market and creating institutions for housing finance.
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Political change marked the difference between the approaches of the countries of Eastern Europe and the former Soviet Union (FSU). The Baltics and most Eastern European countries wanted to break away from communism and the FSU domination--so their transition was characterized first by political change.
... See More + Communists were discredited and removed from power, creating a period of "extraordinary politics" and a window of opportunity for reform. The collapse of the FSU did not lead to political change in most FSU states. There were indications of discontent with the Union, but except for the Baltics these were not as strong as in the Eastern European countries and there were no explicit demands for independence. The former communists hoped that the Commonwealth of Independent States (CIS) set up after the collapse of the FSU would evolve into a loose federation maintaining old trade and financial links. Many FSU countries avoided policies different from Russia's. Most political leaders did not initially think that they would need structural reform policies which could diverge from Russian policies. The pace of reform quickened only after the collapse of the ruble zone in the FSU in 1993. Knowing where to go helped shape reform. The Eastern European and Baltic countries, wanting to join the European Union and encouraged to do so, first initiated political reform, which led to economic reform. Most FSU countries, not knowing with whom to align, initially saw no choice but the Russian Federation. Once reforms are launched, the outcomes are quite similar. Growth starts about two full years after stabilization, although it took about a year longer in the FSU. Initial conditions are important to the transition. Short to medium-term prospects seem most favorable to Eastern Europe and the Baltics, although they still have to catch up with the OECD countries. If admitted to the European Union, they may attain high growth rates even in the longer term. The FSU countries have even more catching up to do. In the short to medium-term, countries with slower population growth rates and strong reform efforts should enjoy rapid per capita growth. The Central Asian countries, with their high population growth rates, need economic growth rates faster than their population growth rates. This leaves little room for slowing reform. Given the benefits of integration, there is a strong case for Central Asian countries pushing for an economic union, which would also facilitate the restructuring of their economies.
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In this paper, the authors examine monetary policy in 26 transition economies in Central and Eastern Europe (CEE) and the Former Soviet Union (FSU) between 1989-1994.
... See More + They provide a schema for classifying the use of 6 important monetary policy instruments, both direct and indirect, and suggest criteria for defining market-oriented use of these instruments. They assess the extent of market-oriented instruments use during the period under review and around stabilization. The impact of instrument use on inflation and financial depth, which declined dramatically during the transition's early years, is also explored. The authors indicate several clear patterns. Among them, by the end of 1994, slightly less than half the countries were relying primarily on market-oriented forms of monetary instruments and had moderate or low reliance on such instruments. Countries quickly formulating a monetary policy response were more likely to switch to market-oriented instruments. Second, CEE countries moved more rapidly than FSU countries towards these forms, even when stage of stabilization is controlled for. Third, using credit ceilings appeared helpful in the year of stabilization, especially in CEE countries; the elimination of these controls was associated with effective stabilization. The authors conclude that monetary stability goes hand in hand with adjustment in the real sectors. Generally, the relatively weak link between market orientation of instruments and indicat effective suggests thst inflation control and financial depth are more directly related to policy stance, which is in turn related to broader structural reforms.
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The transition from a planned economy to a market economy involves a complex process of institutional, structural, and behavioral change. This article develops an index of economic liberalization and analyzes its interaction with growth and inflation, using data from twenty-six transition countries for 1989-94.
... See More + The article reveals two paradoxes of transition. First, the attempt to maintain output by subsidizing enterprises results in larger declines in output than occur under a policy of reducing subsidies. Second, price liberalization results in lower inflation than occurs under a policy of continued price controls. Strong common patterns exist among countries at similar stages of reform. The common legacy and the associated changes that result from initial disruptions in the socialist economic coordinating mechanisms and subsequent liberalization measures go a long way toward explaining the transition experience. Because strong interactions between liberalization and stabilization are likely, stabilization becomes a priority for the resumption of growth.
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In analyzing the transitional experience of countries in Central and Eastern Europe (CEE) and the former Soviet Union (FSU), the authors find strong common patterns for countries at similar stages of reform despite differences in initial conditions.
... See More + To establish rankings, the authors create a reform index combining the intensity and duration of economic liberalization. Freeing domestic prices is one element of reform captured by the index; it was needed to enable governments to cut subsidies and restore macroeconomic balance. Other dimensions of reform captured by the index are liberalization of external trade, including foreign currency convertibility, and facilitation of private sector entry through privatization of state enterprises and improvements in the environment for private sector development. Some countries moved faster on reform than others, and one major reason appeared to have been the pace of political liberalization. Liberalization has, indeed, encouraged capital and labor to reallocate from industry toward services, many of which were previously repressed; and the repressed sectors fueled the return to positive growth in fast reformers. For slow reformers, the main problem in achieving stabilization has been the continued monetization of fiscal and quasi-fiscal deficits, associated with attempts to maintain employment in the old system. Among the policy implications are: 1) stabilization is a priority for the resumption of growth, and this requires extensive liberalization; 2) stabilization is made difficult by output contractions in the early stages of liberalization, by limited external financing, and by very large depreciations of the real exchange rate; and 3) there is no evidence that a slower pace of reform strengthens the fiscal position of slow reformers; their consolidated fiscal and quasi-fiscal deficits are quite high.
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